Major investors flocked to the nation's biggest banks in the final quarter of last year, fueling the big rally in their stocks.
Citicorp, Chase Manhattan Corp., and NationsBank Corp. all tallied sizable gains in institutional ownership during the fourth quarter, according to newly calculated yearend data from CDA/Spectrum.
There were exceptions, however. Some institutions cut their holdings in a few superregional banking companies, including Banc One Corp. and First Union Corp.
Money managers at Bankers Trust New York Corp. evidently saw significant potential in the shares of NationsBank, the superregional based in Charlotte, N.C. On behalf of its clients, the New York bank boosted its ownership in NationsBank by more than 21.5 million shares-or 492%-to an 8.8% stake.
Bankers Trust also increased its holdings in Wells Fargo & Co., San Francisco; Norwest Corp., Minneapolis; and two New York rivals, Chase and Citi.
A spokesman at Bankers Trust said the increases might have been due to indexing-investing customers' money in companies the bank believes will match the overall stock market's performance.
Another Bankers Trust officer, however, said there might have been an error in filings with the Securities and Exchange Commission and that the figures could be inflated.
Fidelity Management and Research Corp., Boston, the nation's largest money manager in its capacity as adviser to the huge Fidelity Investments family of mutual funds, was also a fan of major banks' stocks in the final months of last year.
It lifted its holdings in BankAmerica Corp. by 16% and at yearend owned 5.1% of the San Francisco banking company. Fidelity also bought almost 3.8 million shares of Citicorp, bringing its stake to 4.6%.
TIAA/CREF, the teachers' retirement fund, remained a buyer of big bank stocks. It boosted its holdings in Citicorp by 13% during the fourth quarter but only by 2% in BankAmerica. And it increased its 4.2 million- share stake in Banc One by 13,400 shares.
Scott Budde, buy-side analyst at the fund, said the growth in institutional ownership reflects banks' growing size and the growing confidence that banks can overcome the exposures to problem loans that caused "blow-ups" in the past.
"Loan pricing is getting worse, and banks are still doing highly leveraged loans, but the amount they're holding on their books has dropped significantly," Mr. Budde said. That means they're not exposed to deterioration in credit quality such as caused bank stocks to drop in the 1980s, he said.
Not surprisingly, the shares of money-center and major superregional banks with heavy institutional ownership posted strong quarterly performances and were among the leaders of the bank stock rally.
BankAmerica's stock soared 20.2% in value from Sept. 30 through Dec. 31; Citicorp shares appreciated 12.5%. By contrast, the Standard & Poor's bank index rose 11.7% during the same period; Banc One advanced a comparatively modest 5.8%; First Union, 9.2%; and Wells Fargo, 4.1%.
Banks are popular with portfolio managers because they are perceived to be simple and relatively low-risk means of entry into the important and growing financial services sector.
Mutual fund managers, flush with cash from 401(k) investors, seek investments likely to match market performance, said Daniel R. Perla, managing director at Harbor Capital Management, Stamford, Conn.
Mr. Perla, who invests in small banks and thrifts, said the influx of money into big banking companies is also due to Wall Street's acceptance of the notion that earnings at these banks are less susceptible than before to changes in interest rates.
But the portfolio manager cautioned: "That story has been told several times, and it hasn't proven true."
While many big league investors evidently like the prospects of big bank stocks right now, the feeling is apparently not universal.
In the latest installment of his famous letters to shareholders of Berkshire Hathaway Inc., famed investor Warren Buffett recently said he felt stocks were fully valued.
And in line with that view, Mr. Buffett's company, the top investor in Wells Fargo, did not add to its ownership position during the fourth quarter. Its stake remained 7.8% at yearend.
Capital Research & Management Co., the big Los Angeles-based money manager, continued to sell bank stocks.
The firm sold seven million shares of Banc One in the fourth quarter, after having unloaded about three million in the third quarter. Still, at yearend Capital Research owned 15.7 million shares, for a 3.6% stake in the Columbus, Ohio, banking company.
Capital Research also further trimmed its stake in First Union, selling 445,000 shares during the fourth quarter after shedding 3.2 million in the third. But at yearend, the firm still owned 11.2 million shares and was First Union's largest shareholder, with a 4.1% stake.
Of course, money managers shift investments for reasons that may or may not be related to an individual company's performance or outlook. Their purposes include securing the accumulated gains in a stock, meeting internal investment guidelines, or general shifts in market strategy.
While Capital Research was reducing its holdings in Banc One and First Union, it was boosting its stake in First Chicago NBD Corp. by 1.3 million shares, or 9%. On Dec. 31, it owned more than 13.5 million shares, for a 4.3% stake.
The firm declined to comment on its investment strategy.